DoD spent $46.9M on turbine fuel, with Valero Marketing and Supply Co. securing a 7-day delivery order

Contract Overview

Contract Amount: $46,896,109 ($46.9M)

Contractor: Valero Marketing and Supply CO

Awarding Agency: Department of Defense

Start Date: 2020-12-29

End Date: 2021-01-05

Contract Duration: 7 days

Daily Burn Rate: $6.7M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: 14000000 USG OF TURBINE FUEL, AVIATION (JP8)

Place of Performance

Location: SAN ANTONIO, BEXAR County, TEXAS, 78249

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $46.9 million to VALERO MARKETING AND SUPPLY CO for work described as: 14000000 USG OF TURBINE FUEL, AVIATION (JP8) Key points: 1. The contract value of $46.9M for a 7-day delivery period suggests a high per-diem cost for aviation turbine fuel. 2. Competition dynamics for this contract are not detailed, but the award was made under full and open competition. 3. The fixed-price contract with economic price adjustment introduces potential for cost fluctuations based on market conditions. 4. The short duration of the delivery order (7 days) indicates an urgent or immediate need for the fuel. 5. The primary sector is Defense, with the Defense Logistics Agency as the awarding agency. 6. The contract's value is significant, but its short-term nature limits long-term performance assessment.

Value Assessment

Rating: fair

The total award of $46.9M for a 7-day period for turbine fuel is substantial. Benchmarking this against similar short-term fuel procurements is difficult without more context on the volume and specific type of fuel. The economic price adjustment clause adds a layer of uncertainty to the final cost, making a direct value-for-money assessment challenging without tracking market price fluctuations during the contract period. The contract value relative to the duration suggests a high unit cost or a very large volume requirement for the specified week.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit offers. However, the provided data does not specify the number of bids received or the details of the bidding process. This level of competition is generally favorable for price discovery, but without knowing the number of bidders, it's hard to definitively assess its effectiveness in driving down costs for this specific procurement.

Taxpayer Impact: Full and open competition is the most taxpayer-friendly approach, as it theoretically allows for the best prices to emerge. However, the ultimate benefit to taxpayers depends on the actual number of bids and the competitiveness of those bids.

Public Impact

The primary beneficiary is the Department of Defense, ensuring operational readiness through the supply of critical aviation fuel. The service delivered is the provision of turbine fuel (JP8), essential for military aircraft operations. The geographic impact is focused on Texas, where the fuel was supplied, supporting military installations in the region. Workforce implications are minimal for this specific contract, as it primarily involves the supply of a commodity rather than extensive labor services.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price volatility due to the economic price adjustment clause.
Short contract duration may not reflect long-term market pricing or supplier commitment.
Lack of detail on the number of bidders limits assessment of true competitive pressure.

Positive Signals

Awarded under full and open competition, suggesting a broad market solicitation.
Ensures critical fuel supply for military operations, supporting national security objectives.
The Defense Logistics Agency's involvement indicates a standardized and established procurement process for fuel.

Sector Analysis

The petroleum refining and distribution sector is critical for national infrastructure and defense. This contract falls within the broader energy sector, specifically focusing on the supply of aviation fuel. The market for military-grade fuels is often specialized, with a limited number of qualified suppliers capable of meeting stringent military specifications and delivery requirements. The value of this contract, while significant for a short period, is one component of the DoD's overall energy procurement strategy, which aims to ensure reliable access to fuel for global operations.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). Therefore, there are no direct subcontracting implications or specific impacts on the small business ecosystem stemming from this particular award. The procurement was open to all responsible sources, which would include small businesses if they met the qualifications, but it was not specifically targeted towards them.

Oversight & Accountability

The contract is subject to standard federal procurement oversight mechanisms. The Defense Logistics Agency (DLA) is responsible for managing and overseeing this contract. Transparency is provided through contract award databases like FPDS. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse related to the contract. The fixed-price with economic price adjustment structure requires monitoring of market price indices to ensure fair adjustment.

Related Government Programs

Turbine Fuel, Aviation
Petroleum Products
Defense Logistics Agency Procurements
Fuel Supply Contracts
Fixed Price with Economic Price Adjustment Contracts

Risk Flags

Economic Price Adjustment Clause
Short Contract Duration
Potential for Price Volatility

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $46.9 million to VALERO MARKETING AND SUPPLY CO. 14000000 USG OF TURBINE FUEL, AVIATION (JP8)

Who is the contractor on this award?

The obligated recipient is VALERO MARKETING AND SUPPLY CO.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Logistics Agency).

What is the total obligated amount?

The obligated amount is $46.9 million.

What is the period of performance?

Start: 2020-12-29. End: 2021-01-05.

What is the typical price range for JP8 turbine fuel procured by the DoD?

Determining a 'typical' price range for JP8 turbine fuel is complex due to significant market volatility, varying contract terms (fixed price, FFP-EPA), delivery locations, volumes, and the specific time of procurement. However, historical data suggests that prices can fluctuate widely. For instance, during periods of high crude oil prices, the cost per gallon can increase substantially. Contracts with economic price adjustment clauses, like this one, aim to mitigate risk for both the government and the contractor by allowing prices to track market indices. Without access to the specific indices used for this contract and the market conditions during its 7-day validity, a precise benchmark is difficult. However, general market intelligence and past DoD solicitations indicate that prices can range from approximately $2.00 to over $5.00 per gallon, depending heavily on the aforementioned factors. The $46.9M award for a short duration implies a substantial volume or a period of elevated pricing.

How does the economic price adjustment (EPA) clause typically function in fuel contracts?

An Economic Price Adjustment (EPA) clause in a contract allows for the modification of the contract price based on fluctuations in specific economic factors, such as commodity prices, labor rates, or inflation indices. For fuel contracts, EPA clauses are commonly tied to published indices for crude oil or refined petroleum products (e.g., West Texas Intermediate or Brent crude oil prices, or specific jet fuel indices). The clause specifies the base price, the index to be used, the frequency of adjustment, and the formula for calculating the price change. This mechanism aims to protect both the contractor from unforeseen cost increases and the government from paying excessively inflated prices if market costs decrease. It requires careful monitoring and administration by the contracting officer to ensure adjustments are made accurately and fairly according to the contract terms.

What is Valero Marketing and Supply Co.'s track record with DoD fuel contracts?

Valero Marketing and Supply Co. is a significant player in the energy market and has a history of supplying fuels to various government entities, including the Department of Defense. Analyzing their specific track record with DoD fuel contracts would involve reviewing past awards, contract performance evaluations (if publicly available), and any reported issues or disputes. Companies of Valero's size often hold multiple indefinite-delivery/indefinite-quantity (IDIQ) contracts or are awarded individual delivery orders under larger contract vehicles. Their participation in 'full and open competition' suggests they are a recognized and capable supplier meeting DoD's requirements. A deeper dive into contract databases would reveal the volume and types of fuel they have supplied, the agencies they've served, and their performance history, which is crucial for assessing reliability and value.

What are the risks associated with a short-duration (7-day) fuel delivery contract?

Short-duration contracts, like this 7-day delivery order, primarily address immediate or urgent needs. The main risks include potential price premiums for expedited or spot-market supply, as suppliers may factor in the urgency and limited planning window. There's also a risk of supply disruption if the sole supplier faces unforeseen issues, as there's little buffer time to switch to an alternative. For the government, the administrative overhead of frequently issuing short-term contracts can be higher than managing longer-term agreements. From a performance perspective, it's difficult to assess long-term reliability or efficiency based on such a brief engagement. The economic price adjustment clause, while mitigating cost risk, also introduces uncertainty over the final expenditure within that short window.

How does the 'Petroleum Refineries' NAICS code (324110) relate to this contract?

The North American Industry Classification System (NAICS) code 324110, 'Petroleum Refineries,' is assigned to establishments primarily engaged in refining crude petroleum and manufacturing gasolines, kerosene, and other petroleum products. This code is relevant because Valero Marketing and Supply Co., as a supplier of aviation turbine fuel (JP8), is likely involved in the refining process or sourcing directly from refineries that produce this specialized fuel. While the contract itself is for the *delivery* of the fuel, the NAICS code indicates the industry sector of the primary business activity of the awardee or the nature of the product being procured. It signifies that the fuel supplied meets the standards and specifications typically produced by petroleum refineries.

Industry Classification

NAICS: Manufacturing › Petroleum and Coal Products Manufacturing › Petroleum Refineries

Product/Service Code: FUELS, LUBRICANTS, OILS, WAXES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: SP060220R0700

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)

Evaluated Preference: NONE

Contractor Details

Parent Company: Valero Energy Corporation

Address: 1 VALERO WAY, SAN ANTONIO, TX, 78249

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $46,896,109

Exercised Options: $46,896,109

Current Obligation: $46,896,109

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060220D0649

IDV Type: IDC

Timeline